Episode 1 decision page
Prepublication draft, reviewed 5 October 2026
Rent or buy at 7.28%?
The short answer, for this example (before tax):
- Cash up front: buying takes $98,693 (20% down plus closing costs).
- Each month, year 1: owning takes $973 more cash than renting; about $275 of that is principal the buyer keeps as equity.
- Over time, in this example, before taxes: if the renter invests the same cash and each year's difference, the renter is ahead by $45,044 after three years and $52,505 after seven.
Your worksheet
1. Cash left after buying
2. Your three local numbers
3. Talk it through together
| Prompt | Person 1 | Person 2 |
|---|---|---|
| What matters most to me in this decision? | ||
| What outcome worries me most? | ||
| What trade-off could I accept? |
The full workings
1. The options
- Buy the home with 20% down and a 30-year fixed mortgage at 7.28%.
- Rent a comparable home and invest the cash a buyer would need up front, plus the difference in cash each year.
2. What cash does buying require?
| Buy | Rent | Label | |
|---|---|---|---|
| Cash up front | $98,693 | $0 modelled (see note) | Calculated |
| Year 1, per month (average) | $3,283 | $2,310 | Calculated |
| Difference, per month | Owning takes $973 more cash | Calculated | |
3. If they move early
| If they leave after… | Position, before tax | Label |
|---|---|---|
| 3 years | Renter ahead by $45,044 | Calculated |
| 7 years | Renter ahead by $52,505 | Calculated |
4. What changes the result
Each forecast assumption is moved by 1 percentage point in the direction that helps buying, first one at a time, then two together. The model is re-run for every row. These are illustrations, not predictions.
| Change from the example | Test | After 7 years, before tax |
|---|---|---|
| None (the example) | Baseline | Renter ahead by $52,505 |
| Home value growth 4% (from 3%) | One change | Renter ahead by $20,134 |
| Mortgage rate at purchase 6.28% (from 7.28%) | One change | Renter ahead by $24,494 |
| Return on invested savings 5% (from 6%) | One change | Renter ahead by $40,237 |
| Rent growth 4% (from 3%) | One change | Renter ahead by $45,372 |
| Home value growth 4% (from 3%) and mortgage rate at purchase 6.28% (from 7.28%) | Two together | Buyer ahead by $7,877 |
| Home value growth 4% (from 3%) and return on invested savings 5% (from 6%) | Two together | Renter ahead by $7,827 |
| Home value growth 4% (from 3%) and rent growth 4% (from 3%) | Two together | Renter ahead by $13,000 |
| Mortgage rate at purchase 6.28% (from 7.28%) and return on invested savings 5% (from 6%) | Two together | Renter ahead by $12,916 |
| Mortgage rate at purchase 6.28% (from 7.28%) and rent growth 4% (from 3%) | Two together | Renter ahead by $17,361 |
| Return on invested savings 5% (from 6%) and rent growth 4% (from 3%) | Two together | Renter ahead by $33,218 |
5. Illustrative tests of local facts
Facts you can check, each changed by an illustrative amount; the model is re-run for every row. The size of each change was chosen by us, so read this as how much each fact can move the answer, not as a ranking of which fact matters most for everyone.
| If your local figure is… | After 7 years, before tax | The fact to get |
|---|---|---|
| Rent $100 a month higher | Renter ahead by $41,555 | Rent for a comparable home nearby |
| Rent $100 a month lower | Renter ahead by $63,456 | Rent for a comparable home nearby |
| Property tax 0.6% instead of 1.1% | Renter ahead by $32,927 | Local property tax rate |
| Property tax 1.6% instead of 1.1% | Renter ahead by $72,083 | Local property tax rate |
| Home insurance $1,000 a year higher | Renter ahead by $61,631 | Insurance quote |
| Closing costs 5% instead of 3% | Renter ahead by $65,409 | Lender's Loan Estimate |
| HOA or mortgage insurance $200 a month | Renter ahead by $74,406 | HOA dues / mortgage insurance quote |
6. How sure can we be?
Sensitive to assumptions. Renting is ahead in this before-tax example. The result also depends on the combination of your local costs, financing and future returns.
- What we tested: the result after seven years, before tax, with each forecast assumption moved 1 point alone and in pairs (section 4), and seven local facts changed (section 5).
- What held: Renting stays ahead in each of the single changes shown.
- What reversed it: One of the 17 tested cases reverses it: home value growth 4% (from 3%) and mortgage rate at purchase 6.28% (from 7.28%), together.
- What is not modelled and could matter: taxes, which depend on the household. For this example at seven years, the main taxes left out (on the renter's investment gains, and the mortgage-interest and property-tax deductions for households that itemize) would narrow the renter's lead or leave it unchanged, provided the home sale qualifies for the exclusion; we have not calculated by how much. Over longer horizons a home gain above the exclusion would be taxed, which works the other way. Also the timing of investing, which the model does once a year.
7. Not in the numbers
Stability, flexibility to move, schools and neighborhood, and the time and work of owning a home. These are real at every point of the decision; weigh them alongside the numbers.
8. Your next facts to get
- Rent for a genuinely comparable home nearby: same size and type, not a smaller apartment.
- The full monthly cost of owning: principal and interest, property tax, home insurance, maintenance, HOA dues, mortgage insurance if you put down less than 20%, and any extra utilities an owner pays. A lender's Loan Estimate shows the payment; if that payment already includes property tax and insurance (escrow), do not add them a second time.
- How long you are likely to stay. The result depends heavily on it.
9. Assumptions and sources
| Input | Value | Label | Source or basis |
|---|---|---|---|
| Mortgage rate, 30-year fixed | 7.28% | Observed | Freddie Mac PMMS, week ending 1 Oct 2026. A national survey average; using it for this household is our assumption, and your own quote will differ. |
| Home price | $429,100 | Observed | NAR median existing-home price for all housing types, August 2026 (released 10 Sep 2026) |
| Rent | $2,289/month | Observed | Zillow typical single-family asking rent, August 2026 (released 16 Sep 2026) |
| Down payment | 20% | Assumed | Example choice |
| Mortgage term | 30 years | Assumed | Example choice |
| Closing costs | 3% of price | Assumed | Example within a typical range; your Loan Estimate gives the real figure |
| Property tax | 1.1% of value a year | Assumed | Example; varies widely by location |
| Home insurance | $2,200 a year | Assumed | Example; get a quote |
| Maintenance | 1% of value a year | Assumed | Example; older homes usually cost more |
| HOA and other owner costs | $0 a month | Assumed | Example; many homes have HOA dues |
| Growth in insurance and HOA | 3% a year | Assumed | Example assumption |
| Renter's insurance | $250 a year | Assumed | Example value |
| Home value growth | 3% a year | Assumed | A future rate nobody can know; see section 4 |
| Rent growth | 3% a year | Assumed | A future rate nobody can know; see section 4 |
| Return on invested savings | 6% a year | Assumed | After fees, before tax; a future rate nobody can know; see section 4 |
| Selling costs | 6% of sale price | Assumed | Example within a typical range |
| Years compared | 7 years | Assumed | Example horizon; change it to your own |
| When savings are invested | Once a year, at year end | Assumed | Model convention; investing monthly would change the results, most noticeably the break-even year |
| Taxes | Not modelled | Assumed | Before-tax illustration; see section 6 |